MinFin bond auction receipts surge to UAH 17 bln as interest rates rise again

Ukraine’s Finance Ministry raised UAH 11.4 bln and EUR
158 mln (UAH 16.8 bln equivalent) at its weekly bond auction on Nov. 24,
compared to UAH 2.5 bln (equivalent) at the auction last week. The auction
receipts came from the placement of 5M, 6M, 1Y, 2Y, and 4Y UAH-denominated
bonds, as well as 1Y EUR-denominated bonds.

More than half of auctions UAH receipts – UAH 7.0 bln
– came from the sale of 5M bonds to nine bidders with a weighted average
interest rate of 10.0%. The second largest UAH receipts – UAH 3.3 bln – 
were received from the sale of 6M bonds to three out of four bidders with an
average interest rate of 10.25 (vs. 9.0% for 6M bonds two weeks ago).

Minfin also satisfied 13 out of 18 bids for 1Y bonds
for UAH 522 mln with a weighted average interest rate of 10.75% (vs. 10.42% for
these bonds two weeks ago). Five out of seven bidders were successful in
purchasing 2Y bonds for UAH 409 mln at 11.4%. The rest of the UAH receipts –
UAH 192 mln – came from the sale of 4Y bonds to five bidders at 11.7%

One-year EUR-denominated bonds were sold to 22 out of
23 bidders with an average weighted interest rate of 2.45% (vs. 2.2% for
comparable bonds placed in June).

Evgeniya Akhtyrko: Despite a
significant increase of receipts, the results of the latest MinFin bonds
auction can hardly be viewed as the government’s achievement on the way to
solving the problem with financing the budget gap. In fact, the UAH and EUR
receipts are just enough to cover the government outlays related to the
redemption of EUR-denominated bonds for EUR 200 mln on Nov. 19 and
UAH-denominated bonds for UAH 11.8 bln on Nov. 25.

According to our sources, MinFin had to put in an
additional effort to achieve even this rollover. On Monday, Nov. 23, the
Finance Minister Serhiy Marchenko held a large-scale video conference call with
top managers of the largest Ukrainian banks to enlighten them regarding the
situation at the debt market and to clarify the position of the commercial
banks, activity of which on the market has been very low recently.

On top of that, the government went further by hiking
interest rates both for UAH and EUR denominated bonds.

The results of the bond auction in the upcoming
weeks will show if MinFin’s efforts on mobilizing the market will result in
getting consistently higher auction receipts.